Secretary for Transport v. Wong Bun

LDRW 14 OF 2001 (Review)

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

RAILWAYS ORDINANCE APPLICATION NO. 14 OF 2001

_______________

_______________

_______________________

DECISIONS ON REVIEW

_______________________

Background

1. On 3rd May 2002, the Tribunal delivered its judgment ("Judgment") on this case in which the Tribunal determined the compensation for, inter alias, (a) Car parking Space No. P7 of Wah Kai Industrial Centre, No. 211 Texaco Road, Tsuen Wan, New Territories, Hong Kong ("CPS") in the sum of HK$300,000.00; and (b) Car Parking Space No. L17 of Wah Kai Industrial Centre, No. 211 Texaco Road, Tsuen Wan, New Territories, Hong Kong ("LPS") in the sum of HK$430,000.00.

2. The Respondent applied on 31st May 2002 to review the compensation for CPS and LPS. The Respondent's application was made on the following grounds: -

"1. In determining the Applicant's application for compensation for CPS,

(a) the Tribunal failed to consider sufficiently or at all that the car parking ratio of Tsuen Tung Industrial and Po Yip Building were disparate from the ratio of Wah Kai Industrial Building and therefore erred in fact and/or in valuation principle in accepting Comparables No. AC1, No. AC2 (in Tsuen Tung Industrial Building) and No. RC1 (in Po Yip Building) as suitable comparables for valuation of CPS.

(b) the Tribunal failed to consider sufficiently or at all that Comparable AC4 (in Superluck Industrial Centre Phase 1) was materially different from CPS in being much less accessible and with much lower headroom and therefore erred in fact and/or in valuation principle in accepting Comparable No. AC4 as a suitable comparable for the valuation of CPS.

(c) in the alternative to paragraph 1(b) above, the Tribunal failed to consider and apply sufficiently or at all suitable adjustment factor or factors to Comparable AC4 (in Superluck Industrial Centre Phase 1) for accessibility, maneuverability and headroom before applying the comparable for the valuation of CPS and therefore erred in fact and/or in valuation principle in holding that the total adjustment percentage was only -3% (for car parking ratio only) for Comparable No. AC4.

2. In determining the Applicant's application for compensation for LPS,

(a) the Tribunal failed to consider sufficiently or at all the comparable AL2 (in Waylee Industrial Centre) was disparate in size, accessibility and maneuverability from those of LPS so much so that the same was not relied upon by the experts of both parties and the Tribunal therefore erred in fact and/or in valuation principle in accepting Comparable No. AL2 as a suitable comparable for the valuation of LPS.

(b) in the Alternative to paragraph 2(a) above, the Tribunal failed to consider and apply sufficiently or at all the suitable adjustment factor or factors to be applied to comparable AL2 (in Waylee Industrial Centre) for the factors of size, accessibility and maneuverability be applying the comparable for the valuation of LPS and therefore erred in fact and/or in valuation principle in holding that the total adjustment percentage was not +11% (for lorry parking ratio only) for Comparable No. AL2."

3. In summary, the Respondent wished the Tribunal to reconsider the suitability of 5 comparables in the valuation of CPS and LPS and the appropriateness of the adjustments previously made by the Tribunal in the Judgment of this case. These 5 comparables are:

(i) AC1, AC2 in Tsuen Tung Industrial Building ("Tsuen Tung"), RC1 in Po Yip Building ("Po Yip"), and AC4 in Superluck Industrial Centre Phase 1 ("Superluck Phase 1") for the valuation of the CPS and

(ii) AL2 in Waylee Industrial Centre ("Waylee") for the valuation of the LPS.

The Respondent's ground of review - on failure to consider sufficiently or at all the car parking ratio between the comparable buildings of Comparables No. AC1, AC2 and RC1, and CPS

4. The Respondent noted that the Tribunal had correctly rejected AC8 in Metropolitan Factory & Warehouse Building ("Metropolitan") as a suitable comparable for the valuation of CPS on the ground that Metropolitan had a "vast difference in car parking ratio" from Wah Kai, namely 1.8 and 11.5 respectively. Therefore, the Respondent submitted that given that Wah Kai had a car parking ratio of 11.5, it would be inherently inconsistent if AC8, with a car parking ratio of 1.8, was considered not suitable but AC1 & AC2 in Tsuen Tung, with a car parking ratio of 4.9, and RC1 in Po Yip, with a car parking ratio of 4.9, were considered suitable.

5. On this issue of car parking ratio, the Applicant submitted, "This criticism (of the Respondent) is misconceived. Tribunal rejected AC8 because the difference in car parking ratio (11.5 vs. 1.8) is more than 6-fold. By contrast, the difference in car parking ratio between AC1 & AC2 on the one hand, and subject carpark on the other (11.5 vs. 4.9) is less than 2.5 times." The Applicant also submitted, "AW had proposed, in relation to the difference in car parking ratio, an adjustment of +5% for AC1 & AC2, and +15% for AC8. The Tribunal opined that the adjustment of +5% for AC1 & AC2 is insufficient, and adopted +10% instead. If AC8 were to be retained, the adjustment for car parking ratio would have to be at least +30%. It is undesirable for such a large adjustment to be made in respect of one single factor. The Tribunal is therefore correct in excluding AC8. There is nothing 'inherently inconsistent' in the Tribunal's approach."

6. We agree with the Applicant's submission that the Tribunal's decision to reject AC8 on account of its extremely low car parking ratio (I space per 11.5 units) when compared with Wah Kai was not inconsistent with the Tribunal's other decision of not discarding Comparables AC1, AC2 and RC1. We find that the Tribunal had correctly made a decision in the finding of facts that in light of the smaller differences in the car parking ratios of these three comparables and Wah Kai, they should still be treated as suitable comparables for the purpose of valuation of CPS. We consider that in the valuation of a piece of property, there are bound to be many occasions that any expert valuation surveyor (and hence in the absence of agreements between different experts, the Tribunal) must draw a line to decide what comparable should be discarded on account of certain differences between the comparables and the subject. This is one of those occasions and in this instance, the Tribunal had correctly drawn such a line.

7. The Respondent further submitted that whilst the parties had dealt with the accessibility and maneuverability of AC1 & AC2, and the factors affecting RC1, they had not dealt with the car parking ratio of these comparables in their submissions in the original hearing of this case ("Hearing"). We decide that this argument per se is not a reason for reviewing the decision to retain or to reject these 3 comparables on account of their car parking ratios. The car parking ratios of various comparables and Wah Kai were shown in the exhibits produced by the experts. There was no dispute on those car parking ratios. The experts also agreed that car parking ratio of a particular building was a factor that might affect the value of a car parking space in that building, be that a space for private car or lorry. The Tribunal was therefore entitled to use the data on car parking ratio in reaching its deliberation, whether or not the parties had dealt with them in their submissions.

8. The Respondent submitted that the Tribunal had in the Judgment applied a 10% adjustment on car park ratio for these 3 spaces. Given that the car park ratios in Tsuen Tung and Po Yip were more than double of that in Wah Kai, the Respondent submitted, "it is questionable whether a 10% adjustment is enough to reflect such abundance in supply". Again, we consider that this is also one of those occasions that the Tribunal has to make a subjective valuation decision, in the absence of consensus opinion between the different experts called by the parties. We have reviewed the Tribunal's previous decision on the appropriate percentage adjustment to be applied to these 3 comparables and found that there is no reason to make any change.

9. The Respondent had submitted in the Hearing that in the light of the abundance of other comparables, AC1 & AC2 should be rejected. In the Review, the Respondent submitted that for the same reason, there was no need to rely on AC1, AC2 and RC1. The Respondent accepted that if there was a scarcity of comparables, it might be acceptable to use more disparate comparables and apply bigger adjustments. The Respondent suggested, "However, in this case, apart from these 3 car parks and AC4, there are still 5 other comparables for use. These 5 comparables are more in line with the characteristics of CPS. Their unadjusted values are all at $300,000 and above. Their adjusted values are also close to and above $300,000. These show the trend of value of private car parks of similar characteristics. They should be enough for the purpose of the valuation...".

10. We find that it is more important to ask whether a certain comparable is an appropriate comparable. If the answer is yes, that comparable, which was identified and used by a party, should be retained. As a matter of principle, in direct comparison method of valuation, it is a truism that the more is the number of suitable comparables, the more reliable will be the result of analysis. This is because with more comparables, less reliance will be placed on any particular comparable and the subjectivity in analysis will be averaged out as well. Therefore, in this case, since we decide not to discard the 3 comparables AC1, AC2 and RC1 on account of their car parking ratios, there is no reason not to use them in the analysis.

11. We also disagree with the Respondent that that there was an abundance of comparables in the valuation of CPS. Originally, a total of 16 comparables were considered by the two experts called to give evidence in the Hearing. That was reduced to 9 comparables in 6 buildings, as summarized in the table at paragraph 22 of the Judgment. If, as suggested by the Respondent in this Review, AC1, AC2 and RC1 were to be rejected for the above reasons and AC4 were to be rejected for another reason (to be dealt with below), only 5 comparables in 4 buildings remained.

12. For the aforesaid reasons, we decide that after review, the 3 comparables AC1, AC2 and RC1 are not to be rejected for the purpose of valuation of CPS, as suggested by the Respondent.

The Respondent's ground of review - on failure to consider sufficiently or at all the material difference of Comparables No. AC4 and CPS

13. The reasons submitted by the Respondent for rejecting Comparable AC4 are summarized as follows:

1. The Comparable AC4 was at a disadvantage of requiring the provision of the existing protective railing. "The disadvantage is caused by its location being at the car park entrance and is prone to be rammed into by incoming and outgoing vehicles."

2. "The user of AC4 has to 'remove and reinstate' the railing before and after the parking of his car. This is quite troublesome for a car user. The users of the subject space CPS and the other comparables are not required to carry out this task every time they park their cars into their spaces."

3. Its headroom was limited. "A driver of a light goods vehicle, when maneuvering into AC4, has to exercise great care to avoid the top from being scrapped by the overhanging metal structure which reaches out into the inner part of AC4."

4. "Exhibit R9 also shows that once the vehicle is parked inside AC4, there is little space for the left rear door to be opened".

5. The Tribunal had rejected a lorry car park comparable, RL1 as being unsuitable because its "physical difference when compared with the subject space in Wah Kai" (because RL1 was large enough to accommodate 2 private cars). "On the same footing, AC4, in having so many physical differences including its size and convenience for car users, namely poor accessibility, difficulty in maneuvering and risk of damage when parking an LGV, when compared with CPS, should not be accepted as a comparable."

14. On the issue of the location of Comparable AC4, its accessibility and its being easily rammed into by other incoming and outgoing vehicles, the Applicant submitted that it should clearly not be the case, from a closer look of the car park plan at page 182 of Exhibit A-2.

15. We find that according to the car park layout plan Comparable AC4 is lying in between two other car parks, car park no. 37 to its north and car park no. 39 to its south. Besides, Comparable AC4 is not occupying any corner position, which is usually more susceptible to damage by passing traffic than a car park located near the car park entrance. We therefore fail to see that Comparable AC4 is being exposed to a higher risk of being rammed into by incoming and outgoing vehicles.

16. The Applicant also submitted that the Respondent had mistaken the presence of the railings to be a necessity rather than a desirable add-on. The Applicant drew to the attention of the Tribunal that as some owners of private cars in industrial buildings wanted extra protection to protect their fancy cars, they erected add-on iron railings to give protection to their cars. A striking example, the Applicant added, "was afforded by Carpark space No. 23 in Superluck Phase 2, as can be seen from the photos at [115, 184] and the plan at [116]". We agree with the Applicant that the railings found in Comparable AC4 are an add-on feature but not a necessity. Therefore, whilst the railings gave greater protection to the car, it would invariably also make it more difficult for the owner to park the car, and to open the door and get out. However, on balance, since that was an add-on feature, the advantages of the feature should have exceeded the disadvantages before the owner decided on its installation and retention. In any event, if the owner decided to change their mind, he could also have the railings removed at any time. Therefore, the mere physical existence of the railings at AC4 should not have reduced its value, not to say made it an unsuitable comparable for CPS.

17. Although the Respondent's expert gave evidence that Comparable AC4 had lower headroom at the portion near the adjacent column and the wall. However, no evidence was adduced as to the headroom of the overhanging metal structure or the standard maximum headroom of a car that was to be parked in a private car park such as Comparable AC4. In addition, we find from the car park layout plan at page 182 of Exhibit A-2 that the demarcation boundary of Comparable AC4 (i.e. car park no. 38) falls outside the limit of the column, whilst from the photo at Exhibit R-9, we also find that the overhanging metal structure does not actually project beyond the limit of the column next to Comparable AC4. Therefore, upon review of the exhibits produced in the Hearing, we find that there is no evidence that the overhanging metal structure affects the parking of vehicle at Comparable AC4 at all.

18. The Tribunal decided in the Judgment to discard Comparable RL1 because on the finding of facts (agreed by the parties), two private cars were found parked on that Comparable. Although the dimensions of RL1 was not produced as evidence, the Tribunal found that as there was unequivocal evidence that the size of Comparable RL1 was so different from LPS in Wah Kai, Comparable RL1 should be rejected. This is not the case for Comparable AC4. This was no evidence that a private car, or even a LGV, could not be parked in the space of Comparable AC4.

19. For the above reasons, we decide that none of the grounds for rejection of Comparable AC4, as submitted by the Respondent and summarized above, can be substantiated. Therefore, Comparable AC4 should not be rejected as a comparable for CPS.

The Respondent's ground of review - on failure to consider and apply sufficiently or at all suitable adjustment factor or factors to Comparable No. AC4

20. The Respondent further submitted that in the alternative, if the Tribunal still considered AC4 to be a suitable comparable, then adjustments should be made to it in addition to the adjustment for car parking ratio. The Respondent however submitted that "the adjustment may be too large to make it a useful comparable."

21. On the other hand, the Applicant submitted that "If car park no. 23 of Superluck Phase 2 had been bought and sold around the valuation date, clearly no downward adjustment would have been appropriate for the iron railings, for the same should not have been there. For the same reason, the Tribunal is correct in making no downward adjustment for the railings for AC4".

22. After review, we fail to see why adjustments have to be made for the existence of railings or the nearby overhanging metal structure, or for the position or size of Comparable AC4. Therefore, we do not make, in the analysis of the comparables, any change in the adjustment of Comparable AC4.

Conclusion on the suitability of Comparables AC1, AC2, RC1 and AC4 for the valuation of CPS

23. In summary, we dismiss the Respondent's review application to reject the four Comparables (AC1, AC2, RC1 and AC4) for valuation of CPS in Wah Kai. Hence, the open market value of the CPS remains at $300,000, as in the Judgment.

The Respondent's ground of review - erred in accepting Comparable No. AL2 as a suitable comparable for the valuation of LPS

24. The Respondent submitted that in the final submission of the Hearing, the Respondent had made it clear that Comparable AL2 was not suitable as a comparable as it could only be used for parking private cars. Also, the Respondent submitted that the Applicant had on the other hand not supplied any reason on why Comparable AL2 was a suitable comparable even though its expert (AW) did not deem it fit to include it as a comparable. The Respondent further submitted, "the Tribunal in considering the suitability of AL2 in paragraph 26 of the Judgment did not have the benefit of the measurements of the width of AL2. It is a comparable of the applicant and such measurement should have been made known to the Tribunal."

25. The Applicant refuted the Respondent's above submissions. The Applicant submitted that Comparable AL2 had been included by AW and used to arrive at the average value, at page 51 of Exhibit A-2, and that AW had only made the remark in his first report, at page 28 of Exhibit A-2, that Comparable AL2 "is a little out of tone" with the other two comparables. In addition, the Applicant reminded the Tribunal that in the Applicant's Closing Submission for the Hearing, the Applicant had submitted that the suitable comparables for valuation of LPS were AL1, AL2, AL3 and RL3A, with appropriate adjustments.

26. The Respondent called for the evidence of RW in the review hearing. The Applicant objected in principle to the re-calling of RW in the review hearing. The Tribunal ruled that RW be allowed to give evidence on the size of Comparable AL2 and that the reason for the ruling be given in the judgment for the review.

27. RW gave evidence that subsequent to the Hearing, he had made a site visit to Comparable AL2 again. He took measurements of the dimensions of Comparable AL2 and found them to be 2.41m in width and 7.62m in depth. He further added that in a previous visit with a former owner of a property in Wah Kai, the latter had tried to park a lorry in the space of Comparable AL2 but in vain. Therefore, RW said that Comparable AL2 could not be used for the parking of a lorry but could only be used for the parking of a private car.

28. The Applicant objected to the introduction of new evidence at the review stage. As for the principles for admission of new evidence on review, the Tribunal is referred to China Light & Power v Commissioner of Rating & Valuation [1997] 4 HKC 500 at 505B - 507C.

29. Regarding the production of the new pages, nos. 222 to 225 of Exhibit A-2, by RW, we find that it is apparently clear that these are new pieces of evidence. Although the Respondent submitted that "the sketch and photo at pages 222 to 225 are just to refresh the memory of the Tribunal of what was seen at the site inspection and is not an attempt to adduce further evidence", this argument is not accepted by the Tribunal. Whilst AW had in its report, at page 20 of Exhibit A-2, stated that the dimensions of CPS and LPS were 2.5m x 5m and 3m x 7m respectively, he had not given the dimensions for his comparable RL2 in the same report. Neither had RW given the dimensions of RL2 in his valuation reports produced in the Hearing or in his oral evidence, in chief or in cross-examination. Therefore, it cannot be denied that pages 222 to 225 of Exhibit A-2 are new pieces of evidence.

30. However, we find that Comparable AL2 is not a new comparable. Both parties had been aware of the existence of this comparable from the beginning since it was one of the comparables identified and considered by AW in his valuation report. Therefore, the evidence pertaining to Comparable AL2 is unlike the introduction of new comparable to the valuation process.

31. Also, section 11A (4) of Lands Tribunal Ordinance (Cap. 17) provides that:

The Tribunal may, in any review, hear and receive any evidence it thinks fit for the purpose of determining the issue between the parties.

32. In the circumstances, we decide to accept the pages 222 to 225 of Exhibit A2, notwithstanding that theirs being new evidence. However, we do not accept the hearsay evidence from RW that a former owner of a property in Wah Kai, who accompanied RW to Comparable AL2, could not park a lorry on Comparable AL2. We have studied the car park plan for AL2 and the adjacent lorries and fail to understand why, if AL2 could not be used for the parking of a lorry, as alleged by RW, it was however designated as a lorry car park in the building plan approved by the appropriate government authority. Also, we find that the hearsay evidence of RW is a very important piece of evidence. Since the Applicant was not given the opportunity of cross-examining the witness who gave such evidence, it would be manifestly unjust to accept such evidence as stated by RW. In reaching such a decision, we have also taken into account the fact that neither witness (including RW) had adduced any evidence regarding the size of a typical type of lorry that is supposed to be parked in a lorry car park such as the subject LPS and the size of a standard lorry car park, if such a standard exists.

33. The Respondent also submitted, "the explanation of the unusually low value of AL2 is due to its size (only 2.41m x 7.62m) and the realistic de facto user of the space (for private car parking purpose)."

34. The Applicant in response to the "de facto use" argument of the Respondent countered, " RL3A was accepted by both parties as a lorry comparable, although on the date of site inspection, a Mercedes sports car was parked there instead of a lorry. The subject LPS (L17) was likewise occupied by the Claimant's Mercedes Benz private car (exhibit 'R1', 'R2') instead of a lorry." We agree with the Applicant that the "de facto use" is of little assistance in determining the suitability of a comparable for LPS.

The Respondent's ground of review - on failure to consider and apply sufficiently or at all suitable adjustment factor or factors to Comparable No. AL2

35. The Respondent submitted that even if the Tribunal still accepted Comparable AL2 as a suitable comparable, an adjustment should be made in respect of the dimensions factor, in addition to that for car parking ratio. The Respondent however submitted that the adjustment might be too large to make it a useful comparable. The Applicant on the other hand submitted that no change should be made to the adjustment of Comparable AL2.

36. Having decided that Comparable AL2 should not be rejected as an entirely unsuitable comparable, we agree with the Respondent that an additional adjustment should be made to reflect the dimensions factor, in particular the narrower width of Comparable AL2 vis-à-vis LPS. However, such an adjustment is not to reflect what the Respondent suggested, the difference between LPS and Comparable AL2, assuming that a lorry cannot be parked at the latter space. This is because, from what we have heard, there is no evidence that a lorry cannot be parked at the space of Comparable AL2. Nevertheless, we agree that people will pay less for a narrower space, other things being equal. In this respect, we find that the evidence of AW and RW had not provided any assistance. In the circumstances, we allow a subjective estimate that an additional upward adjustment of 10% is appropriate to reflect the difference in the width of Comparable AL2 and LPS.

Re-calculation of average adjusted sale price of comparables for LPS and estimation of open market value of LPS

37. On the basis of an additional +10% adjustment to reflect the width of Comparable AL2 and the original +11% to reflect the car parking ratio of Waylee, we estimate the adjusted sale price of Comparable AL2 to be $363,000 (i.e. $300,000 x 121% = $363,000).

38. Based on paragraph 27 of the Judgment and the above revised figure for Comparable AL2, the results of the Tribunal's adjustments to all the comparables for LPS are summarized as follows:

Building	Ref. No.	Adjusted Sale Price (compared with the Judgment)
Po Yip	AL1	$409,500 - unchanged
Waylee	AL2	$363,000 (revised from $333,000 in the Judgment)
Wah Lik	Al3	$402,800 - unchanged
Tak Fung	RL1	(Rejected) - unchanged
Wang Lung	RL2	(Rejected) - unchanged
Wah Chun	RL3A	$463,500 - unchanged
Southeast	RL4	$536,800 - unchanged
Average		$435,120 rounded to $435,000

Therefore, we find from the above analysis that the average adjusted sale price of the lorry comparables is $435,000, an increase of $5,000 from our previous estimate in the Judgment. We adopt this as to be the Open Market Value of LPS, i.e., the car parking space no. L17 in Wah Kai.

Costs

39. In general, the costs order will normally be made on the basis of cause. In this review, the Respondent failed to convince the Tribunal that the Open Market Value of CPS (i.e. private car parking space no. P7) should be increased from the value as stated in the Judgment. On the other hand, the Respondent succeeded to increase the Open Market Value of LPS (i.e. lorry car parking space no. L17). Since these are the only two issues raised by the Respondent who took out the application for this review, therefore, on balance, we decide that there shall be no order as to costs.

Orders

40. Accordingly, we order that the total compensation paid by the Applicant to the Respondent in the sum of $1,964,000 be varied to $1,969,000 (Hong Kong Dollars One Million Nine Hundred And Sixty Nine Thousand), a break-down of which is as follows: -

(i) $1,234,000 in respect of the Open Market Value of the Premises;

(ii) $300,000 in respect of the Open Market Value of Car Parking Space No. P7;

(iii) $435,000 in respect of the Open Market Value of Car Parking Space No. L17; and

(iv) Nil compensation in respect of the Respondent's claim for cost of acquisition of alternative premises.

41. Regarding this review, there be no orders as to costs